Ex-Investment Manager Gets 12-Years in $96M Ponzi Scam

Brian R. Callahan, a former investment fund manager, has been ordered to serve 12 years in prison and three years of supervised release for his role in a $96M Ponzi scam. He also must pay $67.6M in restitution. Callahan pleaded guilty to wire fraud and securities fraud in 2014.

Between 12/2006 and 2/2012, Callahan raised over $118M from at least 40 investors related to four investment funds he oversaw. He told investors that their money would be placed in different securities, such as hedge funds and mutual funds. What happened instead was that the former investment manager misappropriated about $96M in a Ponzi scam.

Callahan is accused of diverting millions of dollars toward an unprofitable beachfront residence and resort development named Panoramic View that he co-owned with his brother-in-law, Adam Manson. The latter is a co-defendant in the Ponzi fraud.

Statements made in court, as well as filings, note that Callahan mixed the funds of the different investments, paying his investors tens of millions of dollars in partial redemptions to keep his fraud in operation. The ex-investment manager also allegedly paid himself about $6M, buying luxury houses and expensive cars and paying huge credit card bills and golf club dues. He sought to conceal his Ponzi scam by sending investors bogus account statements that made it seem as if their money was being invested as promised and doing well.

In its 2014 announcement of Callahan’s guilty plea, United States Attorney for the Eastern District of New York Loretta Lynch stated that Callahan employed several offshore entities to commit what is considered one of the “largest investment frauds” to take place in Long Island.

SEC Sued Callahan and His Financial Firms
It was in 2012 that the US Securities and Exchange Commission brought civil investor fraud charges against Callahan and his investment advisory firm Horizon Global Advisors LLC and Horizon Global Advisors Ltd. A few months later, the regulator amended its complaint to file charges against five of Callahan’s offshore funds. It brought aiding and abetting charges against Manson and two of his entities. Callahan’s wife was named a relief defendant.

As for the real estate project, the SEC noted at the time that investors funds were being diverted and for promissory notes that were overstated, unsecured, and illiquid instead of in liquid assets, foreclosure on the property had already been likely.

Ponzi Fraud Cases
Unfortunately, Ponzi scams can lead to major losses for investors who, unbeknownst to them, may have been receiving returns on their investments that were not actual returns but were, in fact, money from other investors. At Shepherd Smith Edwards and Kantas, LTD LLP, our securities fraud law firm is here to help Ponzi fraud victims and their families try to recoup their investment losses. This is not the kind of case you should handle without experienced, legal help.

Nadel Ponzi Scam Victims Recover More of Their Losses
In some cases, financial recovery from a Ponzi scam may take years. For example, investors who lost money in the $168M Arthur Nadel Ponzi scam just received more of their recovery. The receiver tasked with helping to restore investors’ funds recently distributed another $5m to approximately 400 victims.

To date, investors’ have recovered 52% of their losses in the Nadel Ponzi fraud after it failed in 2009.

Nadel was president of Scoop Management, which managed several hedge funds. He disappeared right before he was supposed to issue a $50M payout to investors, leaving a suicide note. Nadel, who was dubbed “mini-Madoff” after muiltibillin-dollar Ponzi mastermind Bernie Madoff, eventually pleaded guilty to the criminal charges against him. He died while behind bars in 2012.